Fitch Rates Hillsborough County Aviation Authority (FL) Tampa Intl. Airport 2008 Bonds ‘AA-’
Fitch Ratings assigns an ‘AA-’ rating to the Hillsborough County Aviation Authority’s (the authority) Tampa International Airport (the airport) revenue bonds, series 2008. In addition, Fitch affirms the authority’s approximately $617 million of outstanding airport revenue bonds at ‘AA-’. Approximately $434 million of the authority’s outstanding revenue bonds are secured by net revenues of the airport system, with the remaining $183 million secured by a first lien on PFC revenues and a back-up pledge of airport system net revenues. The Rating Outlook for all bonds is Stable.
The series 2008 bonds consist of four series, the 2008A (AMT) and 2008B (non-AMT) bonds which are scheduled for negotiated sale during the week of April 14 and the 2008C (AMT) and 2008D (non-AMT) refunding bonds which are scheduled for negotiated sale during the week of April 28. Proceeds from the series 2008A&B bonds will be used to finance aspects of the authority’s 2008 project, including improvements to the economy parking garage, cargo roadways, east side cargo area and north terminal complex site. The proceeds from the 2008C&D refunding bonds will be used to redeem the authority’s variable rate revenue refunding bonds, series 2006C&D.
Fitch’s ‘AA-’ rating reflects the airport’s strong operating performance and debt service coverage, as well as significant generation of non-airline revenues resulting in well below industry average costs per enplanement of $4.31 in fiscal 2007, down from $4.36 in fiscal 2006. Since 2000, annual debt service coverage has ranged from a low of 1.58 times (x) to a high of 1.91x, with all years well above the authority’s 1.25x rate covenant. Operating revenues have increased at a five-year compound annual growth rate (CAGR) of 8.2%, bolstering the airport’s strong operating margin that equaled 49.2% in fiscal 2007.
The airport is located approximately five miles west of Tampa’s central business district and serves the four-county Tampa-St. Petersburg-Clearwater metropolitan statistical area. Passenger levels have been increasing since 2002 with a five-year CAGR of 4.8%. In fiscal 2006, the airport experienced a slight 0.8% decrease in enplanements but it rebounded in fiscal 2007 with a 2.5% increase, serving a record 9.63 million passengers. These increases were attributable to the airport’s dominant position within its growing, increasingly affluent service areas (combined population of approximately 4.2 million). In addition, the airport experienced high levels of origination & destination traffic (88%) as of fiscal 2006, approximately 31% of which was business oriented; it is served by a healthy mix of legacy and low-cost carriers; and it has an experienced management team, evidenced by a long history of disciplined financial and capital planning.
Credit concerns include the airport’s vulnerability to the influences of changing airline economics as carriers continue to reduce domestic flights in light of high oil prices, and related increases in airfares that could diminish discretionary travel; management’s ability to sustain high levels of non-aviation revenues which help to maintain a cost competitive environment for the airlines; and its ability to continue to support implementation of future capital projects.
Long-term risks center on the authority’s capital improvement program for fiscal years 2009-2018, comprised of several projects, collectively known as the north terminal complex, likely resulting in an increase to the authority’s debt burden. However, based on future projections of airline rates and charges, modest increases to costs per enplanement are expected. Implementation of these projects is tied to demand, thus there remains a high degree of flexibility when the authority takes on these projects.
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